Government’s Performance in Power Sector: A Mid-Term Review

The situation report ‘Government’s Performance in Power Sector: A Mid-Term Review’ is based on a seminar held with the same title at the Institute of Policy Studies (IPS), Islamabad on November 18, 2015.

GOVERNMENT’S

PERFORMANCE IN POWER
SECTOR: A MID-TERM REVIEW
Seminar Report

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Government’s Performance in Power Sector: A Mid-Term Review
Seminar Report
Energy crisis is one of the major challenges Pakistan is faced with. The incumbent
government has taken several initiatives to deal with the issue. With the completion of half
of the current government’s tenure, Institute of policy studies (IPS) organized a seminar
titled ‘Government’s Performance in Power Sector: A Mid-Term Review’ held on November 18,
2015, in order to undertake an appraisal of their performance in power sector.
The program was chaired by Mirza Hamid Hasan, former secretary, Water and Power, member of
IPS-National Academic Council and chairman of its ‘Tawanai’ (energy) program. Mr. Ashfaq
Mahmood, former secretary, Water and Power was the key speaker, while, Abu Bakar Madni,
additional secretary, department of energy, government of Sindh also spoke on the subject.
Other participants who took part in deliberations include: Syed Akhtar Ali, member (Energy)
Planning Commission of Pakistan; Maj-Gen (rtd) Akbar Saeed Awan; Sahib-e-Iqbal, Legal
Consultant (energy sector); Syed Haani Masood, Prime Minister’s Performance Delivery Unit
(PMDU); Hafiz Muhammad Mukhtar, Deputy Director Technical, Hydro Planning, WAPDA; Dr.
Fuzail Siddiqui, consulting Geo- Scientist.
Ashfaq Mahmood critically evaluated the government’s performance in comparison with the
strategic framework announced under Energy Policy 2013. A summary of his keynote presentation
is
as
follows:
The government’s primary target was elimination of load shedding through commencement of new
power generation projects and early completion of the one in the pipeline. While the government
has been successful in reducing load shedding to certain extent, it cannot find a sustainable solution
unless it pays heed to areas such as distribution, theft control, revenue collection, transparency,
accountability and customer care, as well.
To achieve the target of eliminating load-shedding by 2018, the present government had aimed at
improving the performance of existing GENCOs, however as per State of Industry Report issued
by NEPRA, the efficiencies of generation plants in public sector have declined by 11 per cent to
36 per cent of their design efficiencies. Similarly, distribution losses were in the range of 9.47 per
cent to 33.40 per cent, as none of the DISCOs met the target set by NEPRA in 2013-14 while in
some of the better rated DISCOs, namely FESCO, GEPCO, LESCO and IESCO, the losses even
showed increase over the previous year in sharp contrast to NEPRA’s requirement to reduce losses.
Conscious of the high cost of generation on RFO, the initial target of coal conversion also could
not make much headway (Gadani Coal Power Projects shelved), due to logistics and transmission
issues, except that a coal-based Sahiwal project is under implementation which again is reported to
have been started without financial close. A number of other coal, gas based projects are on the
anvil (Guddu, Jamshoro, Karachi). Other power generation projects which fall under active
projects list include K-Electric’s coal-based project near Port Qasim and a gas-based project in
KPK. Two IPPs on coal (Kot Addu and Thar) are also on the anvil.

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The progress over Dasu and Basha Hydro Power projects is not satisfactory. Though long-term
projects, but do not seem to be coming on line upto 2022-2023; financial close of Dasu could not
be reached yet. Neelum Jhelum is delayed. Tarbela tunnel 4 is expected to be completed before
2018. It may help reduce the load shedding.
Three LNG based Projects though can be commissioned in time if there are no hitches in
implementation which pose challenges such as financing, fuel supply chain, transmission etc. The
solar park at Bahawalpur has started making some contribution but it is expensive. Energy
Conservation Law is still pending for the last many years and pending in the parliament since last
three years. For installing Smart Meters, legislative improvements are still elusive and there is no
proper strategy visible. In case of Time of day meters, partial success has been observed.
Against the target of increasing revenue collection from 87% to 95%, NEPRA State of Industry
Reports for 2012-13 and 2013-14 show that the revenue recovery as percentage of amount billed
in IESCO has fallen from 94.44 to 90.41%, in GEPCO from 98.25 to 96.14 and in HESCO from
81.19 to 79.16% while there had been only marginal improvements in other DISCOs. The recovery
in QESCO increased from 31.83% to 42.19% and in SEPCO from 53.53% to 59.69% over FY
2012-13 to 2013-14.
On the policy front, there is lack of coordinated, sustainable and integrated policy making. Certain
projects were initiated and at mid-course it was realized that the projects are not feasible e.g. shift
from coal to LNG. Power policy 2015 has been improved but there are some gaps. The policy
guides in the right direction but product of a hasty process breeding considerable waste in
implementation.
For market reforms, the objective was to create a new business model based upon whole sales
transactions, exchanges and wheeling charges to incentivize the private sector for investments in
transmission, especially for the new generation plants to be installed in off grid or in areas where
the grid is weak. However, while implementing the same, though the Central Power Purchasing
Agency (CPPA) has been separated and market rules as submitted by NTDC have been approved
by NEPRA; but the contents of those rules do not serve any of the reform purposes, since all the
capacity of IPPs is committed to CPPA under long term contracts.
In the planning sector, the performance was based on knee jerk approach. It was based on wish list
or idiosyncrasies of the individuals who matter. Planning Ministry has been acting like an
approving or stamping machine. There was no study or research on Macroeconomic Affordability
and Micro Affordability of the projects. There was confusion over priorities and too much
dependence upon import. The indigenous hydro power potential was not given preference. There
was no focus on indigenization of technology and every project has been put in the basket of China
Pakistan Economic Corridor (CPEC).
As far as the performance in management and institutional area is concerned, it is an area of neglect.
Eight secretaries have been changed since last four years in the Ministry of Water and Power.
Conflicts between central and provincial governments are discouraging. In the energy sector, while
the reduced number of institutions increase efficiency, the number of intuitions have been
increased. The mandate of Council of Common Interests though intensified after 18th Amendment,
is not meeting as per the constitutional requirement. Cabinet committee on energy has been
established but the meeting are attended by only the chief minister of one province.
Other performance parameters such as Transparency, Accountability and Competition are also
negative. Circular debt kept on surging, reaching 300 billion rupees, while the audit of the previous

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payment has never been done. Though, Nandipur project was not already transparent, only its one
unit could come into operation. There remained confusion about the price of LNG. The
controversial rental power projects were transformed to fast-track projects. An updated information
about any project cannot be found on the website of MWoP. Ther is no transparency over the issue
Gadani and there is no accountability in respect of the money spent on these projects. The most
significant area of Customer Care was not even among the current regime’s objectives. The
privatization of Discos is another issue which is proceeding as per GoP’s commitments with IMF,
with little effort on improving their existing performance.
Syed Akhtar Ali defended the approach of the Planning Commission and claimed that the amount
of efforts being made by the present government in the energy sector are unprecedented and the
sector is gradually improving. New projects are initiated and the electricity short fall has reduced
from 8000 to 5000 MW. He maintained that there was no significant investment made in Gadani,
so, shifting from Gadani did not cost much. He also criticized the non-professional reporting of
media over the energy issues. He lauded Institute of Policy Studies for the objective assessment of
the issues.
Abu Bakar Madni claimed a paradigm shift in Sindh government’s policies to attract investment
in the energy sector and to exploit the immense potential in the province through public-private
partnership. He cited the creation of a one-stop department, Thar Coal and Energy Board, and other
initiatives of the provincial government like Sindh Renewable Energy Company to attract
investments and joint ventures.
He said that Sindh government aims at making the province self-sufficient in power generation and
export surplus to other provinces within next five years. Thar coal will be generating 5000MW
electricity by 2020 while work on 35 projects of wind energy of an indicated total capacity of
1925.4MW has been initiated. Many solar, micro-hydel and thermal projects are also in progress,
he informed.
Pakistan’s energy crisis could possibly be controlled by early 2018 if all the implementation
schedules of the 2013 energy policy strategic framework were duly met. Setting the objective of
the debate, it was concluded that the evaluation of the government’s performance was to highlight
the areas of concern for improvement and not mere criticism. Given the pace of development in
energy sector which is still rated as of temporary nature as government’s most measures lack farsighted all-round approach which was critical for good governance and institutional growth and
performance.